Can't hide .app extensions

New convert from WIndows, enjoying the experience very much so far. Am getting to grips with my iMac and Lion but there is a small annoyance that has appeared that I'm sure wasn't there a couple of weeks ago - in Finder all my applications are shown with a .app extension. I went to Preferences and unticked the relevant box, at all is OK until I log in again and, you guessed it, they're back again. Any suggestions? No big deal, but it niggles.
Thanks in anticipation.

Many thanks chas_m, I started the process but can't seem to startup in safe mode. On restart I hold down shift after the startup tone, then release when the logo and process bar appear. Other than a slower startup and a slight initial screen flicker there is no indication it is in safe mode. I tried this routine a few times but no different. I still have those pesky .apps showing. Any thoughts?